Canadian Capital Forum 2: Canada’s ERA, NATO 2%, F-35, and Ukraine
Author(s): Scott Douglas Jacobsen
Publication (Outlet/Website): A Further Inquiry
Publication Date (yyyy/mm/dd): 2025/09/27
Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. Schulman offers timely insights into macroeconomic trends, US fiscal policy, and the global tech landscape.
In this interview with Scott Douglas Jacobsen, Schulman explains how Canada will likely back the EU’s “reparations loan,” echoing Ottawa’s ERA model that channels interest from immobilized Russian assets via the ULCM. He outlines G7 mechanics, contingent legal risks, and why NATO’s 2 percent is an input metric, not capability. Schulman reviews Canada’s costlier F-35 program, arguing interoperability makes switching impractical. He estimates Canada’s 2025 Ukraine package as loan-heavy with C$5B ERA financing. With Chrystia Freeland appointed envoy for Ukraine reconstruction, Schulman foresees faster asset-leveraged funding and procurement—Canada exporting financial engineering while guarding against shrinking asset returns and rising defense budgets.
Interview conducted September 25, 2025, in the morning.
Scott Douglas Jacobsen: Will Ottawa back the EU’s “reparations loan” using frozen Russian assets?
Michael Ashley Schulman: Short answer, yes, in spirit and likely in cash. Canada’s not just backing it, they practically dropped the demo track. The EU’s “reparations loan” concept is basically a remix of Canada’s earlier Extraordinary Revenue Acceleration (ERA) initiative, where interest from frozen Russian assets pays the freight on Ukraine loans. The EU would lend now and make Russia pay later (upon reparations), using the cash balances sitting at Euroclear. It’s like letting Moscow fund the tour bus for Zelensky’s comeback tour. Expect Ottawa to play hype man to Brussels here; loudly supportive, already in sync, and ready to scale it under G7 coordination.
So again yes, Ottawa helped write this playbook where Ukraine gets cash now and Russia’s immobilized money pays the tab later. What this means for you is more Ukraine financing without new Canadian taxes unless world court legal risks derail the asset proceeds.
Jacobsen: How would Canada implement it under the G7?
Schulman: Mechanically, the ERA model already exists: Canada signs a bilateral loan to Ukraine; the Ukraine Loan Cooperation Mechanism (ULCM) divvies up the flow of extraordinary revenues from frozen assets to repay each lender proportionally. The ULCM lets each country sign its own deal with Kyiv, while pooling repayments from the same stream of frozen Russian cash. The risk to flag is, as previously mentioned, if courts ever unfreeze assets or returns shrink, Ottawa carries contingent repayment risk. Politically, this is coordinated sanctions-finance or balance-sheet magic, not asset confiscation—technically, there is a difference.
Jacobsen: What is the Extraordinary Revenue Acceleration initiative?
Schulman: The ERA is the G7’s financing hack where interest earned on immobilized Russian sovereign assets is used to pay back long-term loans to Ukraine. Canada signed on for C$5 billion. It’s like weaponizing compound interest, but politely. Economically, it lets Canada support Ukraine without running deficits, unless frozen assets melt legally. It uses Moscow’s stuck money to keep Ukraine’s lights on.
Jacobsen: Has Canada hit NATO’s 2% defence‑spending target this fiscal year?
Schulman: First, let me say that I am not a fan of flat defence spending. Flat targets invite wasteful midnight shopping sprees; governments should buy readiness, not end-year cart-stuffing. You want efficiency rather than just performative spend, call it defence Ozempic.
Ottawa says it’s at 2% this year and NATO’s says that all Allies are expected to meet or exceed 2% in 2025, which tells you we might be rounding up a bit early.
But like I said, the catch is that 2% is an input metric, not an output. The real problem isn’t the number, it’s the number’s simplicity. GDP is a moody thing. You can hit 2% by spending the same while your economy shrinks, or by falling prey to wasteful projects or end‑year splurges, and bias toward easy‑to‑book spend over actual capability. Luckey Palmer the founder of weapons supplier Anduril is a huge proponent of using smarts and technology to sell more capability for less dollars.
Better guardrails like NATO’s 20% equipment share (which Canada says it will exceed) and hard capability deliverables (readiness, munitions stockpiles, ship days at sea, and ISR which is an acronym for Intelligence, Surveillance, and Reconnaissance) may help. But if NATO moves toward a 5% total defence concept (3.5% military + 1.5% resilience/industry), the measurement problem probably gets harder.
Jacobsen: Where does the F‑35 review stand amid rising costs?
Schulman: Yeah, Canada’s Auditor General put a large spotlight on cost growth, ughhh! It is roughly 50% above the original sticker, plus there are schedule and pilot shortfalls. The government launched a review but switching jets mid-race buys chaos; staying the course is the cheaper delay.
For those that don’t know, the Lockheed Martin F-35 Lightning II is a stealth, supersonic, multirole piloted (i.e., old fashioned) fighter aircraft designed to perform both air-to-air and air-to-ground missions. It is considered a cornerstone of the U.S. and allied defense forces. Thus, you will likely stick with the F‑35 because diversifying now would add training and logistics costs.
Interoperability with NORAD and NATO makes switching nearly impossible. For Canada’s economy, expect outlays for long-term upkeep and maintenance of physical infrastructure and systems to keep climbing like a Drake track on release day.
Jacobsen: How much of Canada’s 2025 Ukraine package is military aid vs. loans?
Schulman: In 2025, roughly three-quarters of the headline support is in the form of loans, particularly via the C$5B ERA facility mentioned earlier, while the rest is direct military aid and NATO contributions (about C$1.5–2B). Economically, this indicates that near‑term defence production and services get a bump while the loans cushion Ukraine’s budget without immediate Canadian tax pain.
Jacobsen: What changes with Chrystia Freeland becoming Canada’s special Ukraine envoy?
Schulman: That’s been interesting and beneficial. Chrystia Freeland was I believe minister of transport and internal trade, until she resigned earlier this month, September, to become the Canadian special representative for the reconstruction of Ukraine. She already straddled finance and foreign policy, so this consolidates trade, defence, reconstruction, and sanctions policy under one operator. The move centralizes Canada’s Ukraine policy, creating a single deal desk for reporting to the PM, rather than a four‑department conga line.
Freeland is essentially Canada’s CFO and field general for Ukraine strategy. Expect faster moves on asset-leveraged financing, defence procurement, and post-war economic planning that should benefit Canadian energy, infrastructure, and financial services firms during reconstruction.
Jacobsen: What this means for Canada and allies?
Schulman: Canada’s playing bigger than it looks on paper. By architecting asset-backed Ukraine loans, it’s exporting financial engineering as foreign policy. By front-loading loans and appointing Freeland, it’s speeding up execution. And by sticking to the F-35 despite sticker shock, it’s anchoring itself in NORAD/NATO credibility. But the budget math gets crunchy if frozen asset interest dries up or defence spend escalates toward a NATO 5% total war economy target. Canada is trying to fight smarter, not harder, with money as its main munition.
Thanks for a sharp, thoughtful, and fast-paced session. Always a pleasure to dig into where policy meets strategy, and I’m glad we could cover so much ground.
Jacobsen: Thank you for the opportunity and your time, Michael.
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